MOL and OMV join Dana Gas and Crescent in Kurdistan Region of Iraq

Published May 20th, 2009 - 07:40 GMT

Partnership set to invest US$8 billion in gas resource development and infrastructure; production potential of 3 BCF/day

Dana Gas PJSC, the Middle East’s first and largest regional private-sector natural gas company, and Crescent Petroleum, the Region’s oldest private exploration and production company, announced strategic partnership agreements with OMV, Austria's largest listed industrial company and a leading Central European integrated oil and gas group, and MOL Hungarian Oil and Gas Company, Hungary’s largest listed company and also a leading Central European integrated oil and gas group, which is set to transform the prospects for Iraq’s gas industry to become a major and secure gas supplier to local, regional and European markets.

Signed at the Companies’ head offices in Sharjah, UAE, by and between Badr Jafar, Executive Director of Crescent Petroleum, Rashid Jarwan, Executive Director of Dana Gas, Helmut Langanger, OMV Executive Board member responsible for Exploration and Production and Zoltan Aldott, Executive Vice President of MOL, the groundbreaking partnership is based upon OMV becoming a 10% shareholder in Pearl Petroleum, the company which holds Crescent Petroleum and Dana Gas’ upstream interests in the Kurdistan Region of Iraq, in return for a payment of 350 million US dollars, which in turn will be re-invested in the development of the project; and with MOL based upon around reciprocal shareholdings of their respective companies: MOL will become a 10% shareholder in Pearl Petroleum and Crescent Petroleum and Dana Gas will each become 3% shareholders in MOL, listed on the Budapest, Luxembourg and Warsaw Stock Exchanges. This arrangement unites the Middle East’s leading independent E&P companies with two of Europe’s most dynamic integrated oil and gas companies and the original architects of the Nabucco gas pipeline project.

These partnership agreements between the companies represents a significant vote of confidence in the investment policies and climate of the Kurdistan Regional Government of Iraq and illustrates the companies’ strong belief in the growth potential of the Kurdistan Region of Iraq’s natural gas assets to develop into one of the most significant gas export projects in the region within the next few years. In due course, this will establish Iraq as one of the region’s major gas exporters, once local requirements have been met.

Over the past two years Crescent Petroleum and Dana Gas have jointly invested 605 million US dollars in the successful fast-track development of the Khor Mor gas field and a local natural gas network, including construction of a 176km natural gas transmission pipeline in record time, efficiently enabling local gas-fired power generation plants to provide secure electricity supplies to over 4 million Iraqis, and reduce local oil consumption expenditure which in turn has led to savings in governmental fuel costs of approximately 2 billion US dollars per year. The project partners will now push forward with substantial new investments in the Kurdistan Region of Iraq estimated to be in the order of 8 billion US dollars to further develop the companies’ assets, and facilitate the provision of gas for increased Iraqi power generation capacity and encouragement of local Iraqi industry as a priority, and facilitating the subsequent exports of surplus natural gas into neighbouring countries, including Turkey and beyond into Europe, benefitting local, regional and European economies.

Badr Jafar, Executive Director of Crescent Petroleum stated “Our joint project in the Kurdistan Region now has the full potential of linking the Region’s significant gas reserves to Europe by pipe for the first time, after satisfying all local requirements of course. This will create very material investments in the Kurdistan Region of Iraq in the coming years, with significant employment opportunities and ancillary benefits for all of Iraq and Iraqis, and for the entire region.”

Zoltán Áldott, Exploration and Production Executive Vice President of MOL commented, “We are proud to enter into this ground-breaking partnership, which evidences our confidence and commitment to the policies and potential in the Kurdistan Region of Iraq. Today’s agreement combines the strengths of two leading Middle East energy companies with two leading central European energy companies, and is the first step in jointly pursuing our combined objectives and achieving major economic benefits for both regions. Through this strategic co-operation MOL strengthens the realization of the Nabucco project aimed to increase European gas supply security and complements its strong Central European gas midstream position to significant upstream natural gas sources. We very much welcome our two new strategic shareholders from the Middle East, who will support our business activities further with their extensive business relationships and profound oil and gas business knowledge to create further shareholder value in line with our strategy.”

Helmut Langanger, OMV Executive Vice President responsible for Exploration and Production stated: “OMV is very pleased to announce a long-term partnership between OMV, MOL, Crescent Petroleum and Dana Gas in this project. OMV now has the rare opportunity to participate in the appraisal, development and production of very large gas reserves close to the European market which has significant potential to serve as feedstock for the Nabucco pipeline. This transaction will significantly enhance OMV’s position within the Middle East especially as OMV sees the Kurdistan Region of Iraq as an important area for growth.”

Rashid Al-Jarwan, Executive Director of Dana Gas commented “Dana Gas and its partner Crescent Petroleum greatly look forward to these strategic partnerships with OMV and MOL, and of being constructive core shareholders in MOL. We are very pleased to have demonstrated that constructive reciprocal shareholdings such as these can cement co-operation in world-class private sector-led integrated energy projects, with a positive global impact.”

The announced partnership adds the final necessary component to fully realise the future export potential of this world-class energy project by creating a vertically integrated gas partnership from upstream, to midstream and to final gas markets based on the pooled, complementary strengths of the project partners. Both OMV and MOL are each 16.67% shareholders in the Nabucco project and the original architects of this major natural gas supply scheme.